25 Sep Who’s the Boss? Click to keep reading…
I have worked for two companies in my career, and both companies have been family businesses. They are both in their second generation leadership/ownership.
Once upon a time, the family-owned business was the cornerstone of the American economy. If you took a walk down main street in Anytown, USA fifty years ago you’d see places with names like Smith Family Hardware or Johnson and Sons Garage. Today, most of those businesses have been replaced with the likes of Home Depot and Midas.
In the manufacturing world, there are roughly 300,000 manufacturing companies in America. Most of these companies are manufacturers with less than 500 employees. Many of these small and midsize companies are family-owned.
Last year I wrote about the manufacturing labor shortage. As the economy continues to grow and companies are trying to increase productivity to keep up with demand, the biggest concern is not new technologies or equipment, but the lack of skilled workers. This labor Shortage doesn’t apply just to the workers but to management and ownership as well. The manufacturing industry anticipates a large number of baby boomer retirements among company owners.
What do these company owners do when they decide to retire and the kids don’t want to buy the family business? They will have to merge, sell to a competitor, or turn to private equity, a growing trend in the manufacturing industry. Private equity refers to the shares of an organization that are not openly listed or traded. Private equity is capital, and these investors have the power to dedicate huge amounts of money for a long period of time. These firms try to improve the overall financial prospects of the company with the eventual goal of reselling the organization.
Types of Private Equity included:
Venture Capital – They focus on startups that have a great financial potential.
Growth Capital – Invest in stable organizations that are in expansion mode.
Manufacturing’s Succession challenge runs in parallel to the struggle to find qualified workers.
Manufacturing fell out of favor as a career choice during an era of automation and offshoring. More recently, as manufacturing jobs have shown growth, the industry has been striving to show that it offers technologically sophisticated, well-paying careers.
In Chicago, to address the worker and ownership challenge, Manufacturing Renaissance, a nonprofit company, is working to match retiring manufacturers with entrepreneurs who are interested in keeping the companies local and viable. They have an Ownership Conversion Project, a process to raise money for an expected launch, to help recruit companies and potential buyers, as well as smooth the transition with financing. They don’t want to lose a generation of small businesses that went away for no other reason than that it was time to retire.
I wish them luck!
Within the Lupton portfolio of manufacturing companies, most are family-owned. I am hoping the second, third and fourth generations are interested in keeping the companies within the family.–Commentary provided by Greg Johnson, Business Development
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